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No. 116 Punishment of Bribery and Corruption: Evidence from the Malaysian Judicial System PUNISHMENT OF BRIBERY AND CORRUPTION: EVIDENCE FROM THE MALAYSIAN JUDICIAL SYSTEM WORKING PAPER SERIES Working Paper No. 116 December 2017 Muhammad Arif Idrus, Muhammad Nurul Houqe, Binh Bui & Tony van Zijl Correspondence to: Muhammad Nurul Houqe Email: [email protected] Centre for Accounting, Governance and Taxation Research School of Accounting and Commercial Law Victoria University of Wellington PO Box 600, Wellington, NEW ZEALAND Tel: + 64 4 463 5078 Fax: + 64 4 463 5076 Website: http://www.victoria.ac.nz/sacl/cagtr/ Punishment of Bribery and Corruption: Evidence from the Malaysian Judicial System Muhammad Arif Idrus Muhammad Nurul Houqe* Binh Bui Tony van Zijl School of Accounting & Commercial Law Victoria Business School Victoria University of Wellington Acknowledgements: We are grateful for the comments made by the participants at the 2015 American Accounting Association (especially the discussant), the 2015 sian-Pacific Conference on International Accounting Issues, Gold Coast, Australia. *Corresponding author. Address: Muhammad Nurul Houqe, School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand. Email: [email protected]. Tel + 64 4 463 6591, Fax + 64 4 463 6955 1 Punishment of Bribery and Corruption: Evidence from the Malaysian Judicial System ABSTRACT: We investigate the judicial outcomes of crimes involving bribery and corruption in the context of the Malaysian judicial system. Using a sample of 1869 court cases over the period 2006 to 2013, we find that ‘white-collar’ workers, politically connected offenders, government employees, female offenders, indigenous Malaysians (Bumiputera) and private attorney offenders receive more lenient treatment compared to others. Evidence is also found that prior conviction of the offender and the seriousness of the offencee play significant roles in determining the fines and imprisonment of the offender. Moreover, young offenders receive harsher sentences compared to older offenders in terms of jail sentences but young offenders receive lower fines compared to older offender. We also find that more educated offenders receive more fines but fewer jail sentences. Our findings clearly suggest that not everybody is equal in the eyes of the Malaysian judicial system. Keywords: accountability; independence; Malaysian judicial system; white-collar workers. 2 INTRODUCTION Corruption is regarded as one of the greatest threats to world economic and social development. It undermines good governance, distorts public policy and rule of law, and leads to a misallocation of resources (Seldadyo & Haan, 2006). Corruption can be defined as the abuse of entrusted public power for private gain (Transparency International, 2009). An enormous body of literature deals with the causes, consequences, and remedies for corruption (Seldadyo & Haan, 2006; Treisman, 2007). Our study, which seeks to examine how the Malaysian judicial system handles bribery and corruption cases, is motivated by the observation that Malaysia has increasingly been perceived as a corrupt country. The country has steadily moved down the Transparency International’s corruption perception index from number 37 in 2003 to 47 in 2008 to 54 in 2012 (Transparency International, 2013).1 This perception of increased corruption reflects very poorly on the rule of law in Malaysia. The rule of law variable in the government quality indicator refers to the “the perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence” (Kaufmann et al., 2010, pp.10). Malaysia’s scores for rule of law indicator have been between 0.4 and 0.6 from 2003 to 2012 on a scale of -2.5 to 2.5.2 This simply means that the confidence of the Malaysian public towards their courts is not very high. Criminal justice system or the sentencing system is expected not to be influenced by any existing codes, or prior sentencing and the courts, should of course be fair for all citizens. 1 In Transparency International’s Corruption Perception Index (CPI), the lower the rank of a country the more is the perceived corruption in that country. It is worth to note that the CPI is not designed to allow for country scores to be compared over time due to the fact that rank will always deliver only on relative information which makes it a one-off assessment (Transparency International). 2 This measure gives the country's score on the aggregate indicator, in units of a standard normal distribution, i.e. ranging from approximately -2.5 to 2.5 (The World Bank, 2013). 3 However, other informal norms or more subjective influences such as social structural position, gender, and race are also believed to exist in the system (Miller et al., 1991). We argue that whether there are differences in punishment given to offenders based on their social status, gender, ethnicity, and political loyalty is worth investigating. We believe that the punishments given to offenders can point to some factors that are considered in the sentencing process. Prior studies have found a relationship between demographic characteristics and people’s perceptions of the criminal justice system (Frank et al., 1996; Flanagan & Longmire, 1996; Roberts & Stalans, 2000). Unlike prior studies, we collected data on the outcomes of real court cases. Thus, our data permit us to provide direct evidence on the fairness of the Malaysian judicial system. In this study, we investigate prosecution in bribery and corruption cases in Malaysia. Specifically, we try to distinguish any differences in the final judgment of these cases in relation to offenders with different socio-economic and demographic characteristics. Sample cases were gathered from Malaysian courts for the years 2006 through 2013 that totaled up to 1869 cases. The analysis attempts to address the following questions: (1) Are there any differences between the punishments given to white-collar workers and other criminals in bribery and corruption cases in Malaysia? (2) Do white-collar workers receive any favourable treatment from the judicial system in the sense that they have a shorter time interval between the time their cases were first registered and the trial date? (3) Does the distinction between government employees and non-government employees have any effect on the judges when making a judgment? 4 (4) Are there any differences between the punishments given by courts for crimes carried out in government-controlled and opposition-controlled states? (5) Are there any differences in the punishments due to the ethnicity of the offenders? Prior studies in this area have found mixed results regarding the characteristics that affect sentencing. Apart from that, most of the papers are similar in a way that they are limited to regional sample and used public opinion surveys. This study attempts to improve on prior studies by extending the research to a new country, Malaysia. More importantly, instead of using public opinion surveys, we employ multivariate regression analysis on archival data of 1869 real court cases over the period 2006 to 2013 on bribery and corruption in Malaysia. The key results of this study can be summarised as follows. First, the ‘white-collar’ workers, government employees, and Indigenous Malaysians (Bumiputera) receive more lenient treatment from the judicial system compared to others. Second, males receive harsher sentences compared to females. Third, in states controlled by the ruling party, offenders, in general, receive ‘softer’ treatment from the judicial system compared to that in opposition-controlled states. The rest of the paper proceeds as follows. First, we provide an overview of the institutional background of the Malaysian judicial system by focusing on the structure and the independence of the system. The paper then continues with a section on the theoretical framework and hypothesis development. The following section describes the data and methodology and is followed by data analysis. The final section offers some conclusions. MALAYSIAN JUDICIAL SYSTEM Structure of the Malaysian Judicial System 5 Malaysia is an emerging economy with a population of about 29.7 million (Department of Statistics Malaysia, 2012). The Federation of Malaysia consists of 13 states and 3 federal territories. Malaysia’s population comprises of a mix of racial, religious and culturally diverse people (Department of Statistics Malaysia, 2012).3 Since independence, Malaysia has adopted a governance system very similar to that of the British Empire with particular emphasis on three main branches namely executive, parliamentary, and judiciary (Azmi, 2012). However, there exist strong personal relations and links between the branches, particularly, members of the judiciary may have a submissive tendency to the executive branch (Department of Statistics Malaysia, 2012). The form of Westminster system that Malaysia adopted means that the parliament works in line with the executive branch which simply means the Judiciary has the responsibility to keep everything in balance and ensure a high level of independence (Fadzel, 2004). Moreover, the Malaysian legal system is founded on English common law system (Centre for Public Policy Studies, n.d.). The Malaysian legal structure consists of the legislative branch which is responsible for creating and amending laws, the judiciary branch which has the responsibility to interpret the
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